$5.29
$14.31
bear $5.29
base $11.08
bull $14.31
margin of safety $7.00
market price* $18.91
Kenvue sells household consumer health brands: Tylenol, Neutrogena, Listerine, Aveeno, Band-Aid, Johnson's, Zyrtec and Motrin, split across Self Care, Skin Health and Beauty, and Essential Health. It has been independent of Johnson & Johnson since 2023. Sales have been flat for five years ($15.1B in 2021, $15.1B in 2025), with North America and Asia-Pacific slipping in 2025 and Europe, Middle East and Africa and Latin America growing. One retail customer is about 12% of sales. Pending merger. In November 2025 Kenvue agreed to be acquired by Kimberly-Clark for $3.50 in cash plus 0.14625 Kimberly-Clark shares per Kenvue share. Kenvue shareholders approved it in January 2026 and the US antitrust waiting period has expired, but foreign approvals were still outstanding in the latest filing. This analysis values Kenvue's own business on its own record and does not assume, or price, the deal. If it closes, holders will own Kimberly-Clark stock and cash, so what they end up with also depends on Kimberly-Clark. How we measure earnings. We start from operating cash flow, remove swings in working capital, and subtract stock compensation and the part of capital spending that merely maintains the business. Per share on this basis: $0.93 in 2023, $0.86 in 2024 and $0.80 in 2025. Because owner earnings are after interest, we add back the roughly $440M of yearly cash interest to see what the business earns before its lenders: $1.05, $1.09 and $1.03 per share for 2023-2025. We use the median of those three post-IPO years, $1.055 per share (about $2.0B), as the anchor. Earlier years describe the business as a carve-out inside J&J with no debt of its own, and 2021 was distorted by a roughly $3B settlement of accrued liabilities, so they are excluded. Recent trading agrees with the anchor: in the first half of 2026 sales rose 3.7% and cash flow from operations rose 12%, but one half-year does not move the level. The actual 2025 change was down about 6% on this measure. We start the base case at the anchor, which is 3% above 2025, because the first half of 2026 (10-Q filed August 2026) shows the decline has stopped. Depreciation and amortization of about $557M a year is added back as a non-cash charge; the brands themselves are decades old and not a wasting asset, so we assume no decay for that reason. Base case: business cash flow of $1.055 per share held flat for ten years, since revenue has been stable around $15B and the brands are long-lived, then a slow 2% yearly decline because nothing in the filings shows what sustains it beyond that. No growth is credited: market growth, pricing and new products are not contracted or proven at a steady pace, and management noted that savings from its 2024 restructuring were largely reinvested rather than kept. Business worth about $14.98 per share; it owes about $3.90 per share (about $8.5B of borrowings, mostly 4.85%-5.35% senior notes from 2026 to 2063 plus commercial paper, less roughly $0.6B of cash beyond operating needs, less a small credit because the fixed rates are somewhat below 6%). Value about $11.08 per share. Bear case: the acetaminophen issue is disclosed in the filing. In September 2025 US officials linked Tylenol use in pregnancy to autism, the FDA started a label change process, Texas sued in October 2025 and sought to block Kenvue's dividend, and Kenvue's earlier court wins are under appeal. We assume Tylenol and North American sales pressure cuts business cash flow to $0.95 in year one and $0.85 in year two, continued slippage of about 2% a year after that to $0.72 (about $1.4B, still well above the $440M interest bill), then 4% yearly decline, plus a $1.0B litigation payment in year two. Business worth about $9.39 per share; it owes about $4.10 per share including higher refinancing cost on the 2026 and 2028 notes. Value about $5.29 per share. Talc claims in the US and Canada are indemnified by J&J, so no cost is assumed there. We left out an outright loss of the Tylenol franchise because the record shows only pending actions, not a lost sale. Bull case: the levers are the first half of 2026 improvement carrying through and the new restructuring plan approved in February 2026. Business cash flow reaches $1.10 in year one and $1.20 from year two, held for ten years, then fading 1% a year. Business worth about $18.21 per share; it owes about $3.90 per share. Value about $14.31 per share. We do not credit market recovery or new product launches. Margin-of-safety price: $7.00, well below the base case and above the bear case, reflecting real legal uncertainty on Tylenol and reliance on a flat outlook. The valuation is wrong if Tylenol sales hold up well and the first-half improvement continues, or if the Tylenol legal actions produce heavier costs than we assumed. Not reconciled from the filings: the exact size of any legal accrual for acetaminophen matters, and the 2026 debt balance beyond the second-quarter figures.